Chagrined Snow dumps bonds at loss

By Associated Press
Published May 27, 2004

WASHINGTON - Treasury Secretary John Snow, a strong advocate for tighter government controls over the biggest players in the nation's mortgage industry, has discovered that he inadvertently owned more than $10-million in debt issued by those government-sponsored enterprises, the Treasury Department said Wednesday.

Snow, who found the entire incident "very regrettable," has sold the holdings at a loss of $478,000 even though a Treasury Department ethics officer has ruled there was no conflict of interest, Snow spokesman Robert Nichols said.

Nichols said the mistake occurred because of a misunderstanding between Snow and his investment adviser.

Snow, who took the Treasury post last year after heading up railroad giant CSX Corp., told his adviser to invest in Treasury bonds to avoid any conflict of interest.

However, the adviser believed he had the power to invest in the bonds of such companies as Fannie Mae, Freddie Mac and the Federal Home Loan Banks as well as U.S. Treasury bonds. The adviser purchased $10.87-million of the corporation's bonds for Snow's portfolio without Snow's knowledge, Nichols said.

While Snow has been receiving periodic financial statements over the past year showing that he owned the mortgage company bonds, Nichols said Snow did not bother to open the statements.

The fact he owned the bonds was discovered only during a routine Treasury Department review of his financial disclosure statement.

Snow immediately ordered that the holdings be sold.

He also said he was asking Treasury's independent inspector general to review the finding of Treasury ethics officers that he had not violated any conflict-of-interest laws because of his "commitment to the highest standards of ethical conduct for myself and the department."